Unit 1

Question 1

Define Land

Answer 1

All natural resources used in production.

Question 2

Define Labor

Answer 2

All human actions(mental and physical) used in production

Question 3

Define Capital

Answer 3

used to produce something to sell

Question 4

Define Entrepreneurship

Answer 4

COMBINING other resources to produce a good/service for PROFIT while assuming RISK

Question 5

Name the four economic systems

Answer 5

1. Brute Force
2. Traditional
3. Market
4. Command

Question 6

What economic systems does the US have and how?

Answer 6

Primarily Market
Command i.e. School is required K-12
Traditional i.e. Amish or professions like teaching that runs in the family
Brute Force i.e. stealing and extortion

Question 7

Circular Flow diagram

Answer 7

Product market(top center) points to household(middle right) points to resource market(bottom center) points to firms(left center) points to product market(top center)

Household also points to banks that points to firms which points back to banks and household

Product market(top center) also points to firms which points to resource market which points to household which points to product market

Question 8

Define Market

Answer 8

Whenever a buyer and seller interact to make a transaction

Question 9

Define Demand

Answer 9

the amount buyers are WILLING AND ABLE to purchase at various prices

Question 10

The law of demand states that as the (blank) the (blank)

Answer 10

As the price of a good increases, the quantity demand decreases
or
As the price of a good decreases, the quantity demand increases

Question 11

Which is not an example of opportunity cost

Answer 11

any monetary cost i.e. price of books, tuition, fees

Question 12

Define supply

Answer 12

Amount sellers are WILLING AND ABLE to sell/produce at various prices

Question 13

define law of supply

Answer 13

As the prices of the good (IN/DEC) the quantity supplied (IN/DEC) in that order

Question 14

What factors can cause a change in supply

Answer 14

1. Resource cost (land, labor, capital)
2. Gov’t Policies (Taxes and subsidies)
3. Technology (New, faster, better)
4. Number of Sellers (more sellers more supply)

Question 14

Define Equilibrium

Answer 14

The MARKET FORCES are in BALANCE

Question 14

What movement does change in quantity supply cause

Answer 14

Change in quantity supply causes movement along the curve which reflects the change of price of goods

Question 14

One reason the market will move towards the equilibrium price is because if the price above the equilibrium price the market will have a (blank) and will drive the prices (blank)

Answer 14

Surplus; down

Question 15

One reason the market will move towards the equilibrium price is because if the price below the equilibrium price the market will have a (blank) and will drive the prices (blank)

Answer 15

Shortage; up

Question 16

How do you remove a shortage (short answer)

Answer 16

1. Price of good increases
2. Increases quantity supply
3. Decrease in quantity demand

Question 16

How to remove a surplus (short answer)

Answer 16

1. Price of good decreases
2. Decrease quantity supply
3. Increase quantity demand

Question 17

Top Six GDP

Answer 17

1. China
2. USA
3. India
4. Japan
5. Germany
6. Russia

Question 18

What is the difference between Nominal GDP and Real GDP?

Answer 18

Nominal GDP includes inflation and Real GDP removes it

Question 19

What Items are not included in GDP?

Answer 19

1. Intermediate Goods
2. Imports
3. Paper/ Financial Transactions(stock market)
4. Transfer payments(gov takes money from one group to another like welfare)

Question 20

What is PPP

Answer 20

Recalculation of low income nations GDP using the price from high income nations

Question 21

How do you calculate GDP(In theory)

Answer 21

GDP= C+I+G+(X-M)
C= Consumption
I= Investments
G= Gov’t Spending
X= Exports
M= Imports

Question 22

What is the difference between gross investment and Net investment

Answer 22

Gross investments = net investments + Replacement investments
Net investments are new investments

Question 23

Define Economics

Answer 23

Study of how societies allocate their limited resources among their unlimited wants

Question 23

Define Economic efficiency

Answer 23

meeting society’s wants at the lowest possible cost

Question 23

Define Mixed Economy

Answer 23

Society with two of more economics systems

Question 23

Define Investments

Answer 23

the purchase of capita

Question 23

When the price of a good changes what type of changes does that lead to and what type of physical movement is involved(supply side)
I. Change in supply
II. Change in Quantity Supply
III. Movement of the curve right or left
IV. Movement along the curve

Answer 23

II and IV

Question 23

Which of the following is an example of the Law of Supply?
A. the amount of ice cream sold increases while the price of the ice cream remains constant
B. an increase in the price of ice cream will decrease the supply in ice cream
C. A decrease in the price of ice cream will decrease the quantity supply of ice cream
D. An increase in the price of ice cream will be followed by an increase in the sale of ice cream

Answer 23

C. A decrease in the price of ice cream will decrease the quantity supply of ice cream

Question 24

A. demand increases
B demand decreases
C. supply increases
D. supply decreases

which of the above will happen to the following:
1. The future price of a good is going to decrease what will happen to today
2. Taxes decrease
3. The price of a good increases, what will happen in the market for its complement

Answer 24

1. B
2. C
3. B